David Fuller and Eoin Treacy's Comment of the Day
Category - General

    Autumn Statement: What the UK's New Budget Means for Your Money

    This article from John Stepek may be of interest to subscribers. Here is a section:

    On the income side, if you earn more than £100,000, you really should be looking at how to put as much of your salary as you can above that amount into a pension via salary sacrifice. Why’s that? Because contrary to what you might think, you’re not paying a 40% marginal tax rate. As the team at tax advisors Blick Rothenberg point out, your marginal tax rate is in fact closer to 60%, because £100,000 is the point at which your personal allowance starts to get whittled away. (This is also why the 45% rate was cut to £125,140 rather than £125,000 — so that it aligns with the point at which your personal allowance is all gone.)

    As a result, any money you can shield from this rate is doing a great deal more work than any other pound you save. That said, given that your mortgage is probably going up, and your heating bill is through the roof, it’s quite possible that you are already doing as much as you can on that front without causing a major liquidity crisis in your household.

    On the investment side, falling squarely into the “be thankful for small mercies” category, at least the chancellor didn’t mess around with the annual allowances for tax-efficient “wrappers” — you can still put up to £20,000 a year into an individual savings account, and up to £40,000 a year into a pension (assuming you earn that much each year). The latter of course is still subject to the (frozen) lifetime allowance, so do be careful if you’re in danger of breaching that £1.073 million lifetime cap.  

    So if you have grown a bit sloppy with your admin, and you are holding any shares outside a tax wrapper (i.e. an Individual Savings Account or a pension), then now is the time to get a handle on that and move them. At least then you’ll be shielded from dividend or capital gains taxes. If you have already exhausted these allowances, you might want to start looking at venture capital trusts or enterprise investment schemes, though those are a topic for another day. 

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    LNG Is Proving a Pricey Alternative to Russian Gas Supplies

    This article from Bloomberg may be of interest to subscribers. Here it is in full:

    The disruption to oil flows caused by Moscow’s missile attack on Ukraine underscored the need for Europe to find alternative sources of energy. But the LNG that the continent is seeking as a long-term replacement for Russian natural gas won’t come cheap.

    There’s already a shortage of vessels to deliver liquefied natural gas due to a surge in demand, and a cold snap would increase global competition for tankers. Traders are paying at least 50% more to secure the ships, meaning higher costs for importing nations. Some of the newest, energy-efficient vessels are reportedly fetching up to $200,000 a day - almost double current rates.

    A record 40 LNG tankers are now at sea, waiting for European prices to increase once winter sets in, according to shipowner Flex LNG Ltd. There are already bottlenecks at some ports, mainly in the UK and the Netherlands. That’s due to a limited number of facilities to handle the influx and storage tanks that remain near full with mild weather muting demand.

    This congestion has caused ships to be tied up in floating storage, removing tankers from the spot market, Flex LNG Chief Executive Officer Oystein Kalleklev said.

    Germany is one step closer to providing some relief for the continent. On Tuesday officials said work was complete on the first jetty for a floating terminal near Wilhelmshaven on the North Sea. Firms including energy giant Uniper SE are now doing additional construction, with the idea of having the terminal operational this winter.

    Still, supply could be tight during the coming months, just when Europe needs it most. The continent has relied on the US for much of its imports, and the return of Freeport LNG facility in Texas - following an explosion in June - was set to provide some relief. Now, it looks like the facility will remain offline as repairs continue and it awaits regulatory approvals to restart.

    An extended outage at an LNG complex in Malaysia could further tighten the market, increasing spot cargo demand from North Asia. Spot LNG prices in the region surged Wednesday on higher freight costs.

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    China Asks Banks to Report on Liquidity After Bond Slump

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    Bank of China said it would contain losses and actively pursue relatively secure investments. Industrial Bank Co. and China Zheshang Bank Co. also sent similar posts on their official WeChat accounts, encouraging investors to “buy at lows” and position for longer-term return after the sharp losses in bond market.

    The PBOC injected a net 123 billion yuan ($17.3 billion) of seven-day liquidity via its open-market operations on Wednesday. The central bank said in a statement earlier this week that injections topped 1 trillion yuan this month, through a combination of short-, medium- and long-term policy tools. 

    The yield on China’s one-year government bond was little changed at 2.17% on Thursday, ending a seven-day climb that took it to highest since January. The yield on the 10-year note fell 3 basis point to 2.80%, after jumping 10 basis points earlier this week in its worst drop since 2016. The CSI 300 Index of stocks fell 0.4%.

    Banks’ wealth management products have drawn increased scrutiny from regulators in past few years, amid concern about a host of risks from implicit guarantees and leverage, to duration mismatches and a lack of transparency around where the money is invested.

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    How Conditions Today Compare to Past Equity Market Bottoms

    Thanks to a subscriber for this report from Bridgewater which may be of interest. Here is a section:

    Vietnam strengthens local stock market following strong fluctuations

    This article from Xinhua may be of interest to subscribers. Here it is in full:

    Vietnam's State Securities Commission (SSC) has carried out measures to strengthen the local stock market following strong fluctuations triggered by investors' cautious sentiment and global stock market, local media reported on Wednesday.

    The recent market corrections were caused by investors' cautious sentiment while facing uncertainties and less positive prospects in the world economy and politics, local newspaper Vietnam News reported.

    As part of an effort to ensure a stable, sustainable and transparent development of the Vietnamese stock market, the SSC has strengthened inspection and supervision to address violations on the stock market, the newspaper said.

    It has also proposed amending regulations regarding private offering and trading of corporate bonds in the domestic and international markets to improve the management mechanism for the private placement of corporate bonds.

    In the short term, domestic investor sentiment is still strongly influenced by information, wrong handling of enterprises, and fluctuation in the corporate bonds market.

    However, given Vietnam's long-term macroeconomic growth and the profit gains of listed companies, long-term investment opportunities will appear quite clearly, investment strategist Thai Huu Cong told local newspaper Saigon Investment.

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    Investor-Darling Brazil Faces Key Test as Lula Optimism Dims

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    Lula said that he won’t give any details on his cabinet before returning from an international trip to attend COP27 in Egypt.

    “The stakes are high in terms of fiscal uncertainty, in terms of cabinet composition, in terms of key appointments in the economic team,” said Joel Virgen Rojano, director for Latin America strategy at TD Securities. “All of that for now has a really big question mark and the markets are becoming impatient.” 

    Emerging-market investors from Neuberger Berman LLC to Franklin Templeton had bet on the South American nation ahead of the election as they saw little distinction between Lula and President Jair Bolsonaro’s fiscal agenda. Neuberger wasn’t immediately available to comment on its current recommendations in Brazil.

    “Markets tend to hate uncertainty,” Dina Ting, head of global index portfolio management for Franklin Templeton exchange-traded funds, wrote in an emailed response to questions. “From a long-term perspective, the fundamentals and macro factors have not changed. Brazil is still trading at a discount to historical averages and helped by both elevated commodity prices and favorable demographics, including its young workforce.”

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    Email of the day on bond investing:

    Interested in your investment purchase of DoubleLine Income Solutions Fund. as a long term subscriber I’ve now moved into another investment age whereby I am now an income & growth investor and the timing of your purchase appears to be potentially beneficial.

    I have checked with a number of UK online investment portals and they do not appear to offer access to this closed end fund and therefore my question is whether you accessed this via a US trading platform or direct?

    Any help will be appreciated.

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